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What is hidden evidence?

And why should you care?

Are you interested in starting a company?  Do you worry about the certain financial risk you will undertake?  I am, and I do.  At Harvard Business School we are taught that an entrepreneur should send a “signal” to investors that s/he believes in the idea by acting as if the chance of failure were zero.

This is crazy!

This, and similar myths, are propagated because of the hidden evidence problem.  People are cognitively impaired when it comes to randomness.  We look at successful businesses and people and assume that they did something right.  Investors want to think they can pick these successful businesses and people, and this signal of insanity is something they value.

But we know that failure is a high probability outcome for any entrepreneur or startup.  Indeed venture capital portfolios are littered with dead and failed companies.  And yet these same investors continue to require that the entrepreneur signal they are not worried about failure.

I want to change this attitude.

I want to create value as an entrepreneur while protecting against probable failure outcomes.  I want it to be OK for entrepreneurs not to bet their house in risky ventures.  I want investors to recognize that these are not bad signals, they are rational signals.  I want Harvard Business School to teach more cases on failure outcomes.

I am starting this using this blog.  See the about page for more details - but long story short I intend to write cases on businesses that did everything right but failed due to random outcomes.  I will participate in the discussion on failure and entrepreneurship with this blog.  If successful, I intend to write the book on hidden evidence, and help inject more reality back into business school classrooms as well as investor’s expectations.

And I’m hoping you’ll join me and enjoy the ride.  Thanks for reading - stay tuned for more!

Abraham Murray | entrepreneur | info@hiddenevidence.com

This entry was posted on Wednesday, April 9th, 2008 at 7:25 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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    i like the theme abe. its definitely a bit annerving to dedicate several years of your life to something with an outcome, as you suggest that may have more to do with luck than your own effort (taleb's basic argument). that being said, luck favors the prepared, so i would say that being in the game means that you can seize upon opportunities as they present themselves. if you're stuck at some j.o.b, might be tough to get involved.

    there's something interesting about entrepreneurship is that doing one thing often excludes doing other things. so the biggest thing an entrepreneur has to weigh is opportunity cost. perhaps a key skill of an entrepreneur is to be able to identify which ventures to undertake and which to keep in the fridge.

    as an investor however, i want to make sure i am investing alongside of the entrepreneur. the entrepreneur, not having much cash, invests his opportunity cost in the activity. if not, im not investing... congrats on the blog! looks like a very promising theme
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    Thanks Tijan - I agree that luck favors those prepared to take advantage of it. Even Taleb, more skeptical than I, agrees that you need to at least be in the game and above some minimum quality bar to be able to succeed randomly.

    I also agree that the bigger loss / problems are those of opportunity cost. It just seems silly to me that the current system results in both financial and professional failure to the entrepreneur who didn't realize her dreams - the professional failure and lost opportunity cost weigh heavily enough as is.

    Thanks for joining the discussion - looking forward to many more!

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